Tariff – Politick

Many organisations have undertaken research investigating the potential impact of the effects resulting from the UK leaving the EU without a Free Trade agreement in place.

The optimum outcome of the negotiations (for both the UK and EU member countries) would be for the EU to agree tariff free access to the EU market by the UK and for the UK to agree tariff free access to the UK market by the EU.

A report was published by Civitas in October 2016 which explores the potential tariff implications for the trade in goods between the UK and EU member countries, if a free trade deal is not reached by the time the UK exits the EU. It is based on data from 2015 and does not take into account trade in services between the UK and the EU.

Civitas Press Release 24 October 2016

and a copy of the report can be obtained from

http://www.civitas.org.uk/content/files/potentialpostbrexittariffcostsforeuuktrade.pdf

The following table, extracted from the report, shows an estimate of annual tariffs that could be payable on UK-EU Imports by EU Partner Country based on data from comtrade (http://comtrade.un.org/data/) if trade between the UK and EU was conducted under WTO Most Favoured Nations (MFN) terms.

From the data provided, it can be seen that Germany could have faced potential tariffs costing around £3.4 billion on exports to the UK with France and Ireland seeing tariffs of £1.4 billion and £1.3 billion respectively. This stands in comparison to UK exporters who would see tariffs of £0.9 billon on exports to Germany, and £0.7 billion and £0.8 billion on exports to France and Ireland, respectively.

The total amount paid in tariffs for goods by the UK to the EU would be £5.2 billion compared to the total paid by EU to the UK of £12.8 billion.

Most of the countries in the EU currently have a trade surplus in goods with the UK and all would be affected by the introduction of tariffs. The potential disruption of future trade between the UK and individual EU countries is greater for some than for others e.g. the trade between the UK and Germany in particular.

The report also explores the potential impact of tariffs by industry.

Who pays the tariffs ?

The report considers the trade in goods at a high level and shows there will be a cost to pay for both EU and UK exporters. The potential impact on imports could mean rising costs for retailers and consumers who may be the ones who end up paying import duties. The consumer will have the choice of buying the goods at a higher price, choose not to buy particular products or seek alternatives. Exporters may have to adjust their business models to take into account tariffs allowing them to continue to sell their products at competitive prices in the markets.

A fall in the value of sterling versus the EU has not been taken into account and how this would affect future trade inculding tariffs.

For exporters, WTO rules on state aid and subsidies regulate the provision of any possible compensation that the UK government might wish to give affected industries.